‘Ease of doing business’ refers to the regulatory environment in a country to set up and operate a business. Every year, the World Bank compares the business environment in 190 countries in its Ease of Doing Business Report. In its report released yesterday, India’s rank improved to 100 out of 190 countries in 2017, from its rank of 130 in the previous year.[1],[2] In this context, we explain the parameters on which each country is ranked, what has led to India’s improvement in rankings, and some recommendations made by committees to further improve the business environment in the country.
What parameters is a country ranked on?
The ease of doing business rankings are based on a country’s performance on 10 parameters such as enforcing contracts and starting a business. In India, these rankings are based on the business environment in Mumbai and Delhi. A lower rank indicates better performance on that parameter, whereas a higher rank indicates worse performance on the indicator. India’s ranking improved in six out of the 10 parameters over the previous year, while it remained the same or fell in the remaining four (see Table 1).
Note that these parameters are regulated by different agencies across the three tiers of government (i.e. central, state and municipal). For example, for starting a business, registration and other clearances are granted by central ministries such as Finance and Corporate Affairs. Electricity and water connections for a business are granted by the state electricity and water boards. The municipal corporations grant building permits and various other no objection certificates to businesses.
What has led to an improvement in India’s ease of doing business rankings?
According to the 2017 report, India introduced changes in some of these parameters, which helped in improving its ranking.1 Some of these changes include:
What are some of the other recommendations to improve the business environment in India?
Over the last few years various committees, such as an Expert Committee constituted by the Department of Industrial Policy and Promotion and the Standing Committee of Commerce, have studied the the regulatory requirements for starting a business in India and the made recommendations on the ease of doing business.[7],[8],[9] Some of the issues and recommendations made by these committees are discussed below.
Starting a business: The Standing Committee observed that regulations and procedures for starting a business are time-consuming.8 The Committee observed that as a consequence, a large number of start-ups are moving out of India and setting base in countries like Singapore where such procedures are easier. It emphasised on the need to streamline regulations to give businesses in India a boost. Note that the government announced the ‘Start-up India Action Plan in January 2016.[10] The 19-point plan identified steps to simplify the process for registering and operating start-ups. It also proposed to grant tax exemptions to these businesses.
The Committee had suggested that the procedures and time period for registration of companies should be reduced. In addition, a unique business ID should be created to integrate all information related to a debtor. This ID should be used as sole reference for the business.
Acquiring land, registering property: Under the current legal framework there are delays in acquiring land and getting necessary permissions to use it. These delays are on account of multiple reasons including the availability of suitable land and disputes related to land titles. It has been noted that land titles in India are unclear due to various reasons including legacy of the zamindari system, gaps in the legal framework and poor administration of land records.[11]
The Standing Committee observed that the process of updating and digitising land records has been going on for three decades. It recommended that this process should be completed at the earliest. The digitised records would assist in removing ambiguity in land titles and help in its smooth transfer. It also suggested that land ownership may be ascertained by integrating space technology and identification documents such as Aadhaar. Note that as of September 2017, land records had been linked with Aadhaar in 4% of the villages across the country.[11]
Several states have taken steps to improve regulations related to land and transfer of property.8 These steps include integration of land records and land registration by Andhra Pradesh and Gujarat, and the passage of a law to certify land titles in urban areas by Rajasthan. The Committee also recommended creating a single window for registration of property, to reduce delays.8
Construction permits: In India, obtaining construction permits involves multiple procedures and is time consuming. The Standing Committee had observed that it took 33 procedures (such as getting no objection certificates from individual departments) over 192 days to obtain a construction permit in India.8 On the other hand, obtaining a similar permit in Singapore involved 10 procedures and took 26 days.
Taxation: The Standing Committee had noted that the tax administration in India was complex, and arbitration proceedings were time-consuming. It observed that the controversies on the Minimum Alternate Tax on capital gains and the tax disputes with companies like Vodafone and Shell had harmed India’s image on taxation matters. Such policy uncertainty and tax disputes have made foreign companies hesitant to do business in India.8
The Committee observed that for ‘Make in India’ to succeed, there is a need for a fair, judicious and stable tax administration in the country. Further, it suggested that to reduce harassment of tax payers, an electronic tax administration system should be created.8 Such a system would reduce human interface during dispute resolution. Note that the Goods and Services Tax (GST) was introduced across the country from July 1, 2017. The GST framework allows for electronic filling of tax returns, among other measures.[12]
Enforcing contracts: Enforcing contracts requires the involvement of the judicial system. The time taken to enforce contracts in India is long. For instance, the Standing Committee noted that it took close to four years in India for enforcing contracts. On the other hand, it took less than six months for contract enforcement in Singapore. This may be due to various reasons including complex litigation procedures, confusion related to jurisdiction of courts and high existing pendency of cases.8
The Standing Committee recommended that an alternative dispute resolution mechanism and fast track courts should be set up to expedite disposal of contract enforcement cases. It suggested that efforts should be made to limit adjournments to exceptional circumstances only. It also recommended that certified practitioners should be created, to assist dispute resolution.8
[1] ‘Doing Business 2018’, World Bank, http://www.doingbusiness.org/~/media/WBG/DoingBusiness/Documents/Annual-Reports/English/DB2018-Full-Report.pdf.
[2] ‘Doing Business 2017’, World Bank, http://www.doingbusiness.org/~/media/WBG/DoingBusiness/Documents/Annual-Reports/English/DB17-Full-Report.pdf.
[3] Insolvency and Bankruptcy Code, 2016, http://www.prsindia.org/billtrack/the-insolvency-and-bankruptcy-bill-2015-4100/.
[4] G.S.R. 436 (E), G.S.R. 437 (E) and G.S.R. 438 (E), Gazette of India, Ministry of Labour and Employment, May 4, 2017, http://labour.gov.in/sites/default/files/Notifications%20for%20amendment%20under%20EPF%2C%20EPS%20and%20EDLI%20Schemes%20for%20e-Payment_0.pdf.
[5] Finance Bill, 2017, http://www.prsindia.org/billtrack/the-finance-bill-2017-4681/; Memorandum explaining the provisions of the Finance Bill, 2017, http://unionbudget.nic.in/ub2017-18/memo/memo.pdf.
[6] National Judicial Data Grid, http://njdg.ecourts.gov.in/njdg_public/index.php.
[7] Report of the Expert Committee on Prior Permissions and Regulatory Mechanism, Department of Industrial Policy Promotion, February 27, 2016.
[8] ‘Ease of Doing Business’, 122nd Report of the Department Related Standing Committee on Commerce, December 21, 2015, http://164.100.47.5/newcommittee/reports/EnglishCommittees/Committee%20on%20Commerce/122.pdf.
[9] Ease of Doing Business: An Enterprise of Survey of Indian States, NITI Aayog, August 28, 2017, http://niti.gov.in/writereaddata/files/document_publication/EoDB_Single.pdf.
[10] Start Up India Action Plan, January 2016, http://www.startupindia.gov.in/pdffile.php?title=Startup%20India%20Action%20Plan&type=Action&q=Action%20Plan.pdf&content_type=Action&submenupoint=action.
[11] Land Records and Titles in India, September 2017, http://www.prsindia.org/parliamenttrack/analytical-reports/land-records-and-titles-in-india-4941/.
[12] The Central Goods and Services Tax Act, 2017, http://www.prsindia.org/billtrack/the-central-goods-and-services-tax-bill-2017-4697/.
The Consumer Protection Bill, 2018 was introduced in Lok Sabha in January 2018. The Bill replaces the Consumer Protection Act, 1986. Previously in 2015, a Bill had been introduced to replace the 1986 Act. The 2015 Bill acknowledged that the rapid change in consumer markets, introduction of practices such as misleading advertisements, and new modes of transactions (online, teleshopping, etc.) had necessitated the need for a new law. The Bill was subsequently referred to a Standing Committee, which recommended several changes to it. The Bill was withdrawn and replaced with the Consumer Protection Bill, 2018. The Bill is listed for passage in the ongoing Monsoon Session. In this post, we analyse the Bill in its current form.
How is the 2018 Bill different from the 1986 Act?
The Bill adds various provisions for consumer protection that were absent in the 1986 Act. Key among them are the provisions on product liability and unfair contracts. Under product liability, when a consumer suffers an injury, property damage or death due to a defect in a product or service, he can file a claim for compensation under product liability. The Bill outlines cases in which the product manufacturer, service provider and seller will be held guilty under product liability. Under the proposed law, to claim product liability, an aggrieved consumer has to prove any one of the conditions mentioned in the Bill with regard to a manufacturer, service provider and seller, as the case may be.
An unfair contract has been defined as a contract between a consumer and manufacturer/ service provider if it causes significant change in consumer rights. Unfair contracts cover six terms, such as payment of excessive security deposits in an arrangement, disproportionate penalty for a breach, and unilateral termination without cause. The consumer courts being set up under the Bill will determine contract terms to be unfair and declare them null and void.
What are the different bodies being set up under the Bill?
The Bill sets up Consumer Protection Councils as advisory bodies, who will advise on protection and promotion of consumer rights. However, it does not make it clear who these Councils will render advise to. Under the 1986 Act, the Consumer Protection Councils have the responsibility to protect and promote consumer rights.
To promote, protect, and enforce consumer rights, the Bill is setting up a regulatory body, known as the Central Consumer Protection Authority. This Authority can also pass orders to prevent unfair and restrictive trade practices, such as selling goods not complying with standards, and impose penalties for false and misleading advertisements.
The Bill also sets up the Consumer Disputes Redressal Commissions (known as consumer courts) at the district, state and national levels. These Commissions will adjudicate a broad range of complaints, including complaints on defective goods and deficient services of varying values. These Commissions are also present under the 1986 Act. However, their pecuniary jurisdiction (amount up to which they can hear complaints) has been revised under the Bill. The Bill also adds a provision for alternate dispute redressal mechanism. As part of this, mediation cells will be attached with the Consumer Disputes Redressal Commissions.
What are the penal provisions under the Bill?
The Bill increases penalties for different offences specified in it. It also adds penalties for offences such as issuing misleading advertisements, and manufacturing and selling adulterated or spurious goods. For example, in case of false and misleading advertisements, the Central Consumer Protection Authority can impose a penalty of up to Rs 10 lakh on a manufacturer or an endorser. For a subsequent offence, the fine may extend to Rs 50 lakh. The manufacturer can also be punished with imprisonment of up to two years, which may extend to five years for every subsequent offence. The Authority can also prohibit the endorser of a misleading advertisement from endorsing any particular product or service for a period of up to one year. For every subsequent offence, the period of prohibition may extend to three years. There are certain exceptions when an endorser will not be held liable for such a penalty.
Are there any issues to think about in the Bill?
The 2018 Bill is a marked improvement over the 2015 Bill and addresses several issues in the 2015 Bill. However, two major issues with regard to the Consumer Disputes Redressal Commissions remain. We discuss them below.
First issue is with regard to the composition of these Commissions. The Bill specifies that the Commissions will be headed by a ‘President’ and will comprise other members. However, the Bill delegates the power of deciding the qualifications of the President and members to the central government. It also does not specify that the President or members should have minimum judicial qualifications. This is in contrast with the existing Consumer Protection Act, 1986, which states that the Commissions at various levels will be headed by a person qualified to be a judge. The 1986 Act also specifies the minimum qualification of members.
Under the current Bill, if the Commissions were to have only non-judicial members, it may violate the principle of separation of powers between the executive and the judiciary. Since these Commissions are adjudicating bodies and will look at consumer dispute cases, it is unclear how a Commission that may comprise only non-judicial members will undertake this function.
Second issue is with regard to the method of appointment of members of the Commissions. The Bill permits the central government to notify the method of appointment of members of the Commissions. It does not require that the selection involve members from the higher judiciary. It may be argued that allowing the executive to determine the appointment of the members of Commissions could affect the independent functioning of the Commissions. This provision is also at variance with the 1986 Act. Under the Act, appointment of members to these Commissions is done through a selection committee. These section committees comprise a judicial member.
As mentioned previously, the Commissions are intended to be quasi-judicial bodies, while the government is part of the executive. There may be instances where the government is a party to a dispute relating to deficiency in service provided by a government enterprise, for e.g., the Railways. In such a case, there would be a conflict of interest as the government would be a party to the dispute before the Commissions and will also have the power to appoint members to the Commission.
